A popular steak chain has come under fire after it was revealed it will be slashing the amount of the service charge its waiters receive.
Gaucho, which has 20 branches across the UK, has sparked backlash over its new service charge scheme (tronc scheme) which was set up for them by WTM Troncmaster, a specialist company hired to distribute the service charge.
According to The Guardian, Gaucho’s existing waiters will have their share of the service charge cut from 37% to between 25.45% and 29.4%, while new waiters will get just 17%.
And bar staff are having their share cut too, going down to 17% from the previous 20% they were given.
A letter from WMT Troncmaster reportedly informed Gaucho employees that the service charge would now also be going to ‘staff located at non-public places of business such as head office and central production units’ and potentially agency staff in restaurants not directly employed by Gaucho as well.
The letter added that the service charges are ‘paid by customers in respect of their whole experience’ therefore all team members who impact that experience should ‘participate in and receive a share of the tronc funds’.
WMT declined to comment when approached by Metro, however, a Gaucho spokesperson told The Guardian: ‘The new tronc distribution has been set by the independent troncmaster following industry benchmarking across our Gaucho employees.
‘The new distribution takes into consideration all our front- and back-of-house colleagues. It is an equitable solution for all of our excellent people.
‘The employee costs borne by the Gaucho business remain as before and the business itself does not benefit in any way from the amended tronc system.’
The steak chain claims the tronc scheme is fully compliant with the law, as it comes after the Employment (Allocation of Tips) Act 2023, which came into force at the end of last year.
As per the act, restaurants are required to give 100% of the money from tips and service charges to staff.
Are other restaurant owners going to do the same?
Independent restaurant owner Stuart Gillies, who owns Number Eight in Sevenoaks and Bank House in Chislehurst, says the wording in the Employment (Allocation of Tips) Act 2023 is quite ‘vague’ at times, which is likely why head office staff could be included.
Stuart, the former CEO of the Gordon Ramsay Restaurants, confirmed to Metro that his establishments give 100% of the service charge to restaurant teams, but he’s not surprised that bigger businesses are splitting the money in this way.
‘The industry is under such pressure right now, so they’re looking at any way they can, within the letter of the law, to support the business,’ he explains.
‘If you’re a big company, you’ll have a centralised cost which will be the head office and that really adds a huge burden.
‘But that head office has a massive part to play in the guest experience, potentially from private events, marketing and all other departments – HR included. So I can see why bigger companies come up with a rationale that would mean they should also be part of the service charge.
‘We don’t do that in our business and whether the public think it’s morally correct, there’s a question mark, but I would say Gaucho probably aren’t the only ones doing this. If they’re saying it’s an industry benchmark that means many other large companies will be doing this and it probably just hasn’t come out yet.’
How much is the service charge?
According to Gaucho’s website, a discretionary service charge of 13% is added to customer’s bills at Gaucho Broadgate, Charlotte Street, City, Chancery Lane, Covent Garden, Hampstead, Picadilly, Sloane Avenue, Tower Bridge and Richmond.
While a 12.5% service charge is added at Gaucho’s restaurants in Birmingham, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle.
In the UK we’re used to seeing between 10 and 12.5% tacked on our bills, but it’s actually becoming the norm to see as much as 15% service charge added.
And industry experts have claimed this amount could continue to rise, moving in-line with the 20 to 25% tipping rate that’s standard across the USA.
A number of popular restaurants have already started adding a 15% charge to bills, including Fallow, The Wolseley and Gordon Ramsay’s Lucky Cat, so it’s not difficult to see how this could quickly increase.
‘When costs rise, the staff suffer’
Hospitality operations specialist Jonathan Kleeman believes many restaurant businesses don’t see service charges as a ‘tip’ but instead use them to bump up ‘salaries’.
He claims that service charges have long been used as a way for restaurant staff to top up their salary, saying: ‘For example, someone might be paid a £30k basic salary and £20k in guaranteed service charge. If there isn’t enough service charge income the company makes it up through salary. This has been a common practice for quite some time.
‘This is also why the word “gratuity” has largely disappeared as that refers to a genuine tip.’
As such, Jonathan thinks the government and local councils need to do more to make life ‘easier’ for businesses instead of ‘harder’.
He adds: ‘When costs continue to rise in hospitality, whether energy, rent, or taxes, the first people to suffer are the staff, as businesses try to keep overall costs down.
‘That said, this isn’t true for all restaurants. Many do share their tips properly, though they are in the minority. Ironically, it’s often the more casual venues, like pubs and wine bars, that actually treat the service charge as a genuine tip.’
‘A disgusting practice’
On social media, diners haven’t taken the service charge discovery very well, with some branding it ‘disgusting’ and others vowing to ‘boycott Gaucho’.
In posts on X (formerly Twitter), @daddydoots77 said: ‘Won’t be going to Gaucho again.’
While @OwlsPolitics asked: ‘What’s the point of a service charge if it’s not going to the server???’
And @morealcrusadeinc felt similarly, writing: ‘Greedy f***ers. 100% of service charge should go to the workers who graft in there. Time for diners to vote with their feet.’
@EleanorNess posted: ‘When I leave a tip I have no objections to it being shared with the people in the kitchen etc in *that* particular location but I will not be leaving a tip in establishments who are giving a share to head office employees.’
@TheWildeyBeast thought it was a ‘disgusting practice’ adding that he would ‘boycott’ the chain.
Others shared that they would be removing optional service charge on restaurant bills from now on and instead leaving cash for those who had served them.
But according to Stuart, this wouldn’t necessarily mean restaurant staff get more money.
‘If you stop service charge and went for cash tips, maybe it would work out, but in reality some people just won’t leave anything as they don’t want to pay any extra on top of their bill, or they’ll spend £200 and then leave a fiver and think that’s ok.’
Metro has contacted Gaucho and Rare Restaurants for further comment.
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